nach oben

Quality & Quantity

Erschienen in:

01.07.2014

Does economic liberalization promote economic growth in Pakistan? An empirical analysis

verfasst von: Qazi Muhammad Adnan Hye, Wee-Yeap Lau, Marie-Aimée Tourres

Erschienen in: Quality & Quantity | Ausgabe 4/2014

Einloggen

Aktivieren Sie unsere intelligente Suche, um passende Fachinhalte oder Patente zu finden.

search-config

KI-gestützte Suche

Aus

Abstract

The study aims to examine the short and long term impacts of economic liberalization on economic growth in case of Pakistan from 1971 to 2011. Economic liberalization consists of reforms in both trade liberalization and financial liberalization. This study contributes to the existing literature by constructing an economic liberalization index using principal component analysis. Our results show, firstly, that economic liberalization reforms have a positive impact on economic growth in the short run. However, trade liberalization is negatively associated with economic growth in the long-run. Secondly, the estimated coefficients through rolling window show that impact of economic liberalization on real GDP is unstable during the selected period of sample. This study recommends to policy makers to enhance human capital by having more expenditure on education sector. In addition, financial reforms by way of a sectoral credit allocation should be introduced to further promote the economic growth.

Vorheriger Artikel Current practice in the modelling of age, period and cohort effects with panel data: a commentary on Tawfik et al. (2012), Clarke et al. (2009), and McCulloch (2012)

Nächster Artikel A note on pro-poor social expenditures

Sie haben noch keine Lizenz? Dann Informieren Sie sich jetzt über unsere Produkte:

Springer Professional "Wirtschaft+Technik"

Online-Abonnement

Mit Springer Professional "Wirtschaft+Technik" erhalten Sie Zugriff auf:

über 102.000 Bücher
über 537 Zeitschriften

aus folgenden Fachgebieten:

Automobil + Motoren
Bauwesen + Immobilien
Business IT + Informatik
Elektrotechnik + Elektronik
Energie + Nachhaltigkeit
Finance + Banking
Management + Führung
Marketing + Vertrieb
Maschinenbau + Werkstoffe
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

Jetzt informieren

Springer Professional "Wirtschaft"

Online-Abonnement

Mit Springer Professional "Wirtschaft" erhalten Sie Zugriff auf:

über 67.000 Bücher
über 340 Zeitschriften

aus folgenden Fachgebieten:

Bauwesen + Immobilien
Business IT + Informatik
Finance + Banking
Management + Führung
Marketing + Vertrieb
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

Jetzt informieren

It is negatively linked with EG if the local resources of the country are unable to effectively use the technology generated by the trade openness (see Romer 1986).

Mexico, Venezuela, Costa Rica, Ecuador, Honduras, El Salvador, Paraguay, Guatemala, Dominican Republic, Colombia, Chile, Suriname, Jamaica.

Burundi, Cameroon, Cote d’Ivoire, Ethiopia, Gabon, Ghana, Kenya, Madagascar, Mauritius, Nigeria, Rwanda, Senegal, Sierra Leone, South Africa, The Gambia, Togo.

Computed a FLI in case of 13 developing countries by using interest rates deregulation, reduction of entry barriers, reduction of reserve requirements, reduction of credit controls, privatization of state Banks and and strengthening of prudential regulation. The countries under study were Argentina, Brazil, Chile, India, Indonesia, Malaysia, Mexico, Pakistan, Peru, Philippines, Rep. Korea, Taiwan, Thailand.

Developed financial liberalization in case of in case of India by using six indicator of financial liberalization. These indicators are interest rate liberalization, reduction in reserve requirements, pro-competition measures, increased prudential regulation, stock market development and international financial liberalization.

Developed financial indicator in case of Nepal by using eight component of financial liberalization. These indicators are interest rate liberalization, removal of entry barriers, reduction in reserve requirements, easing credit controls, introduction of Prudential Regulations, stock market reform, privatization of state-owned banks and external account liberalization.

Constructed financial liberalization in case of Botswana by using five indictors of financial reforms like: interest rate liberalization, exchange rate liberalization, reduction in reserve requirement, authorization of new banks and privatization of banks and securities markets.

Hye and Wizarat (2011c) computed financial liberalization in case of Pakistan by using eleven indicators : Islamization, interest rate deregulation, credit controls, stock market reforms, Prudential Regulations, privatization of financial institutions, removal of entry barriers, non performing loans, external account liberalization, debt management reforms and open market operations.

These four indicators of financial development are as follows: market capitalization of listed companies, liquid liabilities and domestic credit to the private sector as a percentage of GDP, and M2/M1.

Diwan (2001), Prasad et al. (2004), Cerra and Saxena (2005) explained that the foreign International capital flows have led to higher volatility. This volatility has led to financial and economic crises in low income countries (see Singh 2003; Easterly 2001). These crises are negatively related to growth, and other growth indicators like investment and saving (Diwan 1999).

The last component (M) shows negative correlation with other variables, so we use only seven indicators weight in the ELI calculation process.

Ahmed, A.D.: Potential impact of financial reforms on savings in Botswana: an empirical analysis using a VECM approach. J. Dev. Areas 41(1), 203–220 (2007). doi:10.1353/jda.2008.0011

Ang, J.B., Mckibbin, W.J.: Financial liberalization, financial sector development and growth: evidence from Malaysia. J. Dev. Econ. 84(1), 215–233 (2007)CrossRef

Bandiera, O., Caprio, G., Honohan, P., Schiantarelli, F.: Does financial reform raise or reduce saving? Rev. Econ. Stat. 82(2), 239–263 (2000). doi:10.1162/003465300558768

Calderon, C., Liu, L.: The direction of causality between financial development and economic growth. J. Dev. Econ. 72, 321–334 (2003)CrossRef

Cerra, V., Saxena, C.S.: Growth dynamics: the myth of economic recovery. IMF working paper 05/147 (Washington, International Monetary Fund) (2005)

Chang, T., Ho Y.-H.: Financial development and economic growth in South Korea: a note on testing demand-following or supply leading hypothesis. Indian Econ. J. 77(2), 153–160 (2002)

Chaudhry, I.S., Malik, A., Faridi, M.Z.: Exploring the causality relationship between trade liberalization, human capital and economic growth: empirical evidence from Pakistan. J. Econ. Int. Finance 2(9), 175–182 (2010)

Diamond, D.W., Dybvig, P.H.: Bank runs, deposit insurance, and liquidity. J. Political Econ. 91(3), 401–419 (1983)CrossRef

Diwan, I.: (1999): Labor shares and financial crises. World Bank, Washington, DC, Mimeo.

Diwan, I.: (2001): Debt as sweat: labor, financial crisis, and the globalization of capital. Draft as of July 2001. World Bank, Washington, DC, Mimeo.

Dollar, D.: Outward-oriented developing economies really do grow more rapidly: evidence from 95 ldcs, 1976–1985. Econ. Dev. Cult. Change 40(3), 523–544 (1992)CrossRef

Dutta, D., Ahmed, N.: Trade liberalization and industrial sector growth in Pakistan: a cointegration analysis. Appl. Econ. 36(13), 1421–1429 (2004)CrossRef

Edwards, S.: Debt crisis, trade liberalization, structural adjustment, and growth: some policy considerations. Contemp. Econ. Policy 7(3), 30–41 (1989)CrossRef

Edwards, S.: Trade orientation, distortions and growth in developing countries. J. Dev. Econ. 39(1), 31–57 (1992)CrossRef

Easterly, W., Islam, R., Stiglitz, J.: Shaken and stirred: volatility and macroeconomic paradigms for rich and poor countries. In: World Bank, annual bank conference on development economics 2000, pp. 191–212. World Bank, Washington, DC (2001)

Fase, M.M.G., Abma, R.C.N.: Financial environment and economic growth in selected Asian countries. J. Asian Econ. 14(1), 11–21 (2003)CrossRef

Frankel, J.A., Romer, D.H.: Does trade cause growth? Am. Econ. Rev. 89(3), 379–399 (1999)CrossRef

Gerschenkron, A.: Economic Backwardness in Historical Perspective. Harvard University Press, Cambridge (1962)

Ghatak, S., Milner, C., Utkulu, U.: Trade liberalization and endogenous growth: some evidence for Turkey. Econ. Plan. 28(2–3), 147–167 (1995)CrossRef

Goldsmith, R.W.: Financial Structure and Development. Yale University Press, New Haven (1969)

GOP: Pakistan Economic Survey 2010–2011. Ministry of Finance, Pakistan (2011)

Gries, T., Kraft, M., Meierrieks, D.: Financial Deepening, Trade Openness and Economic Growth in Latin America and the Caribbean. Working Paper No. 2008–10, Center for International Economics University of Paderborn, Paderborn (2008a)

Gries, T., Kraft, M., Meierrieks, D.: Linkages between Financial Deepening, Trade Openness and Economic Development: Causality Evidence from Sub-Saharan Africa. Working Paper No. 2008–08, Center for International Economics University of Paderborn, Paderborn (2008b)

Grossman, G.M., Helpman, E.: Growth and welfare in a small open economy. In: Helpman, E., Razin, A. (eds.) International Trade and Trade Policy, pp. 141–163. MIT Press, Cambridge (1991)

Gurley, J.G., Shaw, E.S.: Financial aspects of economic development. Am. Econ. Rev. 45(4), 515–538 (1955)

Hye, Q.M.A.: Impact of financial liberalization on economic growth: a case study of Pakistan. Master thesis, Applied Economics Research Centre, KU, Pakistan (2010)

Hye, Q.M.A., Dolgopolova, I.: Economics, finance and development in China: Johansen–Juselius co-integration approach. Chin. Manag. Stud. 5(3), 311–324 (2011a)CrossRef

Hye, Q.M.A.: Financial development index and economic growth: empirical evidence from India. J. Risk Finance 12(2), 98–111 (2011b)CrossRef

Hye, Q.M.A., Wizarat, S.: Impact of financial liberalization on agricultural growth: a case study of Pakistan. China Agric. Econ. Rev. 3(2), 191–209 (2011c)CrossRef

Hye, Q.M.A., Islam, F.: Does financial development hamper economic growth: empirical evidence from Bangladesh. J. Bus. Econ. Manag. (2013). doi:10.3846/16111699.2012.654813

Hicks, J.: A Theory of Economic Growth. Clarendon Press, Oxford (1969)

Johansen, S.: Likelihood-Based Inference in Cointegrated Vector Autoregressive Models. Oxford University Press, NewYork (1995)CrossRef

Jung, W.S.: Financial development and economic growth: international evidence. Econ. Dev. Cult. Change 34(2), 333–346 (1986)CrossRef

Katircioglu, S.T., Kahyalar, N., Benar, B.: Financial development, trade and growth triangle: the case of India. Int. J. Soc. Econ. 37(9), 586–598 (2007)CrossRef

Keho, Y.: Effect of financial development on economic growth: does inflation matter? Time series evidence from the UEMOA countries. Int. Econ. J. 24(3), 343–355 (2010)CrossRef

Kelly, R., Mavrotas, G.: Financial sector development—futile or fruitful? An examination of the determinants of savings in Sri Lanka. WIDER discussion paper No. 14, United Nations University (2003)

Khan, M.A., Qayyum, A.: Trade Liberalization, Financial Sector Reforms and Growth. Working Paper No. 2007:19, Pakistan Institute of Development Economics, Islamabad (2007)

King, R.G., Levine, R.: Finance. Theory and Evidence. World Bank MIMEO, Entrepreneurship and Growth (1993)

Kim, D.-H., Lin, S.-C., Suen, Y.-B.: Nonlinearity between trade openness and economic development. Rev. Dev. Econ. 15(2), 279–292 (2011)CrossRef

Klasra, M.A.: Foreign direct investment, trade openness and economic growth in Pakistan and Turkey: an investigation using bounds test. Qual. Quant. 45(1), 223–231 (2010)CrossRef

Laeven, L.: Does financial liberalization reduce financial constraints? Financial Manag. 32(1), 5–35 (2003). doi:10.2307/3666202

Lee, J.S.: Financial sector and economic development: a survey, economics and development resource center, Report No. 55 (September) (1991)

Levine, R.: Financial development and economic growth: views and agenda. J. Econ. Lit. 35(2), 688–726 (1997)

Levine, R., Zervos, S.: Stock market, banks, and economic growth. Am. Econ. Rev. 88(3), 537–558 (1998)

Levine, R., Beck, T.: Financial intermediation and growth: causality and causes. J. Monet. Econ. 46(1), 31–77 (2000)CrossRef

Lewis, W.A.: The Theory of Economic Growth. George Allen and Unwin Ltd, London (1955)

Lucas, R.E. Jr.: On the mechanics of economic development. J. Monet. Econ. 22(1), 3–42 (1988)

Maduka, A.C., Onwuka, K.O.: Financial market structure and economic growth: evidence from Nigeria data. Asian Econ. Financial Rev. 3(1), 75–98 (2013)

Mazur, E.A., Alexander, W.R.J.: Financial sector development and economic growth in New Zealand. Appl. Econ. Lett. 8(8), 545–549 (2001)CrossRef

Mckinnon, R.I.: Money and capital in economic development. Brookings Institution, Washington, DC (1973)

Nair, L.R.: Financial liberalization and household saving in India. http://www.atlanticcommunity.org/index/Open_Think_Tank_Article/Financial_Sector_Liberalization_and_Household_Savings_in_India (2004)

Neusser, K., Kugler, M.: Manufacturing growth and financial development: evidence from OECD countries. Rev. Econ. Stat. 80(4), 638–646 (1998)CrossRef

Patrick, H.T.: Financial development and economic growth in underdeveloped countries. Econ. Dev. Cult. Change 14(2), 174–187 (1966)CrossRef

Prasad, E., Rogoff, K., Wei, S.-J., Kose, M.A.: Financial globalization, growth and volatility in developing countries. Working paper 10942. http://www.nber.org/papers/w10942 (2004)

Rivera-Batiz, F.L.: The Economics of Technological Progress and Endogenous Growth in Open Economies. Union College, Mimeo (1995)

Robinson, J.: The Generalization of the General Theory and Other Essays. The McMillan Press Ltd, London (1952)

Rodriguez, F., Rodrik, D.: Trade policy and economic growth: a Skeptic’s guide to the cross-national evidence. In: Bernanke, B.S., Rogoff, K. (eds.) NBER Macroeconomics Annual. MIT Press, Cambridge (1999)

Romer, P.M.: Increasing returns and long run growth. J. Political Econ. 94(5), 1002–1037 (1986)CrossRef

Schumpeter, J.A.: The theory of economic development. Harvard University Press, Cambridge (1911)

Shaw, E.S.: Financial deepening in economic development. Oxford University Press, New York (1973)

Singh, A.: Financial liberalization, stock markets and economic development. Econ. J. 107(442), 771–782 (1997)CrossRef

Singh, A.: Capital account liberalization, free long-term capital flows, financial crisis and development. East. Econ. J. 29(2), 191–216 (2003)

Shrestha, M.B., Chowdhury, K.: Testing financial liberalization hypothesis with ARDL model approach. Appl. Financial Econ. 17(18): 529–1540 (2007). doi:10.1080/09603100601007123

Sonmez, F.D., Sener, P.: Effects of human capital and openness on economic growth of developed and developing countries: a panel data analysis. Int. J. Soc. Hum. Sci. 3, 633–637 (2009)

Soukhakian, B.: Financial development, trade openness and economic growth in Japan: evidence from Granger causality tests. Int. J. Econ. Perspect. 1(3), 118–127 (2007)

Sukar, A., Ramakrishna, G.: The effect of trade liberalisation on economic growth: the case of Ethiopia. Finance India 16(4), 1295–1305 (2002)

Villanueva, D.: Openness, human development and fiscal policies. IMF Staff Pap. 41, 1–29 (1994)CrossRef

Wacziarg, R.: Measuring the dynamic gains from trade. World Bank Econ Rev 15(1), 393–429 (2001)

Yanikkaya, H.: Trade openness and economic growth: a cross-country empirical investigation. J. Dev. Econ. 72(1), 57–89 (2003)CrossRef

Yildirim, J., Öcal, N., Erdogan, M.: Financial development and economic growth in Turkey: a spatial effect analysis. http://fp.paceprojects.f9.co.uk/Erdogan.pdf (2008)

Young, A.: Learning by doing and the dynamics effects of international trade. Q. J. Econ. 106(2), 369–405 (1991)CrossRef

Yucel, F.: Causal relationships between financial development. Trade openness and economic growth: the case of Turkey. J. Soc. Sci. 5(1), 33–42 (2009)

Titel: Does economic liberalization promote economic growth in Pakistan? An empirical analysis
verfasst von: Qazi Muhammad Adnan Hye
Wee-Yeap Lau
Marie-Aimée Tourres
Publikationsdatum: 01.07.2014
Verlag: Springer Netherlands
Erschienen in: Quality & Quantity / Ausgabe 4/2014
Print ISSN: 0033-5177
Elektronische ISSN: 1573-7845
DOI: https://doi.org/10.1007/s11135-013-9882-9

Springer Professional

Abstract

Bitte loggen Sie sich ein, um Zugang zu Ihrer Lizenz zu erhalten.

Sie haben noch keine Lizenz? Dann Informieren Sie sich jetzt über unsere Produkte:

Springer Professional "Wirtschaft+Technik"

Springer Professional "Wirtschaft"

Weitere Artikel der Ausgabe 4/2014

Data analysis in the context of teacher training: code sequence analysis using QDA Miner $$^{\circledR }$$ ®

The effects of information sharing and interactivity on the intention to use social networking websites

Double symmetry model and its decompositions in square contingency tables having ordered categories

A novel rater agreement methodology for language transcriptions: evidence from a nonhuman speaker

Current practice in the modelling of age, period and cohort effects with panel data: a commentary on Tawfik et al. (2012), Clarke et al. (2009), and McCulloch (2012)

Survey topic and unit nonresponse

Premium Partner